Wheat Review: Higher close on fund buying, drought

CHICAGO (Dow Jones)--U.S. wheat futures trimmed gains Thursday after climbing to multi-month highs on fund buying and concerns about drought in the important Black Sea region.

September wheat on the Chicago Board of Trade ended up 8 1/4 cents, or 1.4%, at $5.96 1/2 a bushel. Kansas City Board of Trade September wheat jumped 10 1/4 cents, or 1.7%, to $6.11 3/4. Minneapolis Grain Exchange September wheat rose 9 1/4 cents, or 1.5%, to $6.22 3/4.

Prices strengthened on bullish expectations that dryness will reduce exports from the Black Sea region and open the door for the U.S. to sell more wheat. The U.S. competes for business on the world market with countries such as Russia and Ukraine.

Heat and drought have ruined 24 million acres of farmland in Russia, the agriculture minister said Thursday. That represents about a third of field area in the 23 regions declaring a state of emergency because of the drought, or some 20% of the country's total crops.

Still, it may be difficult for wheat to extend its rally because prices have already surged in the face of comfortable ending stocks, said Dale Durchholz, analyst for AgriVisor.

Before paring gains, CBOT September wheat reached $6.10, its highest price since Jan. 11 and the highest price for a front-month contract on a monthly continuation chart since June 2009. The contract has already climbed $1.16 1/4, or 24%, this month.

"People need to wake up to the fact that we're not at $4.50 wheat today," Durchholz said. "We're at $6."

Commodity funds bought an estimated 6,000 contracts at CBOT.

Kansas City Board of Trade

KCBT September wheat closed below its session high of $6.22 1/4, its highest price since Nov. 23. The contract is up $1.15 3/4, or 23%, for the month so far.

Despite bullish expectations for increased export demand, weekly U.S. wheat export sales data were nothing to get excited about. Sales of 382,100 tons were at the low end of trade expectations and down 22% from the prior four-week average.

Minneapolis Grain Exchange

MGE September wheat reached a session high of $6.33, its highest price since Nov. 23. The contract is up $1.10 1/2, or 22%, since the beginning of the month.

Prices look too high for U.S. hard red spring wheat, traded at the MGE, a broker said. The U.S. Department of Agriculture on Monday rated the crop 82% good to excellent.